Has anything been a good hedge against a financial crisis?

[jackg]

I'm wondering if anything actually goes up or stays stable during a financial crisis since most things seem to fall. Meaning that currencies potentially go up during a crisis (bitcoin is considered to behave like gold at this point) but since currencies are always horrible to put money into (not necessarily short term but long term with inflation), what else?

[amicrypto]

Yeah, there are many types of assets that you can buy to make money in a crisis. Economic crisis are mainly a product of defaults on debts by large players. You can buy Credit default swaps that will help you make in a financial crisis. Credit default swaps are instruments that place a bet on whether the country/institution will default on it debt repayment. Though, I am pretty sure that these instruments are not available to an ordinary citizen. Connect with you hedge fund/ Investment banker to know more.

[avikz]

I'm wondering if anything actually goes up or stays stable during a financial crisis since most things seem to fall. Meaning that currencies potentially go up during a crisis (bitcoin is considered to behave like gold at this point) but since currencies are always horrible to put money into (not necessarily short term but long term with inflation), what else?

There are many things where you can put your money to hedge against financial crisis. Let me list down a few for you,

1. Precious metals like Gold and Silver
2. Precious stones like Topaz or Diamond
3. Real Estate (depending on the nature of financial crisis)

Among these three types of investment, Gold is most sought after asset to hedge against a financial crisis. It not just only provides capital protection but also provides liquidity whenever required!

[jackg]

Apparently gold never does very well in financial crises because when people stop earning money they start selling them and thus their value goes down..

Maybe its a hedge but also its potentially risky...

I've had a look at cds but there seems to be a lot of research involved in finding the right one so I'll have to wait on that.

[The Sceptical Chymist]

The only thing that comes to mind, based on the previous financial crisis (2008-2013ish), is precious metals.  But even they weren't exactly a perfect hedge, because they started falling in 2011 after gold & silver peaked.  But they were rising significantly as the crisis was unfolding, and you certainly couldn't count on stocks, bonds, or real estate during that time period.  That was also a global crisis, so most of the world was suffering the same pain and could look for the same sort of hedges.  By contrast, the current crisis in Venezuela is isolated, and anyone with money could find a hedge in metals, stocks, or even crypto.

I think real estate has traditionally served this function, and I do think that there are benefits to owning a house, for example.  The problem is that if you lose your job in the midst of a meltdown, you might not be able to keep up with your mortgage.  Nor does it help you if it's the housing market itself that's melting down, as it was in 2008 or so.  If your house is paid off, though, at least you'll have a place to live.

[jackg]

Jet Cash always thinks the housing market is in a bubble at this point. And I suppose to buy a house I'd have to pull quite a bit out of bitcoin and litecoin which I don't really want to do as I'm not sure where they're going atm and I could pull out just as they shoot up.

People who don't even do economics or anything say we'll probably have a financial crisis by the end of the decade (in 2 years' time which is quite worrying)...

As I said previous metals (the cheap stuff like gold and silver) aren't the best and they're also widely over inflated thanks to the bank if England selling 2x the amount of gold that has already been mined and pretending they have it in their vault... Caesium and rubidium may be good though.

[dothebeats]

I'd also agree that precious metals are still the most sought-after hedges during a financial crisis, but as you pointed out, it has become inflated over the years, and may be in a bubble for all we know. Though even if that's the case, a lot of people will chose these metals than any other investment out there as they know that other people would be looking at the same options, too, and if the need for fast cash arise, they can easily sell it to some other people who's also looking for these metals. Supply and demand with these metals will just even out the scale, and would therefore cause no steep inclines on either side of the spectrum, making its value somewhat stable compared to other options out there.

I think real estate has traditionally served this function, and I do think that there are benefits to owning a house, for example.  The problem is that if you lose your job in the midst of a meltdown, you might not be able to keep up with your mortgage.  Nor does it help you if it's the housing market itself that's melting down, as it was in 2008 or so.  If your house is paid off, though, at least you'll have a place to live.

That's why it's better to get a house fully-paid first before getting something that you'll have to pay over the course of a few years (like a new car). Anyway, perhaps I'm just lucky enough to have made some good profit off of the previous bull run and bought myself a house, established a small business and bought an ancient, 20-year old car that still gets me to places whenever I need to. I'm still a bit short on investments and am still looking for alternatives, though I must say that the local stock market scene is quite promising at this time of the year, and should a financial crisis be knocking at our doors come 2020, I may have made some good profit on stocks already if I start investing now.

[JetAid]

What goes up? - The number of bad debts. House repossessions, unemployment, asset disposal ( this could be why gold may not rise ), suicides.

If you have cash, then it may be a good time to pick up assets. For example, a house that is sold at auction,and needs some maintenance work could be a good buy. If you arrange a deal with a builder for the improvements to be a background job, then you should be able to get the price reduced. Of course, this means the job will take longer to complete, so you will have to consider possible loss of income if it is an investment.

[Chikitita2004]

I'm wondering if anything actually goes up or stays stable during a financial crisis since most things seem to fall. Meaning that currencies potentially go up during a crisis (bitcoin is considered to behave like gold at this point) but since currencies are always horrible to put money into (not necessarily short term but long term with inflation), what else?

True. Finances are always in its roller coaster situation and there will be no guarantee or assurance it will be protected. Even banks get bankrupt and if you are lucky to reach the bracket of insurance then you will be able to get paid with some amount (not equivalent to your own money saved) but if not or below the bracket then you will just be sorry for yourself then. I think there is one classic way on how you could keep your money regardless of the financial crisis. Real estate, or at least invest your money in a property. With real estate, as the years pass by you will have your property with increasing value on it.

[jackg]

What goes up? - The number of bad debts. House repossessions, unemployment, asset disposal ( this could be why gold may not rise ), suicides.

If you have cash, then it may be a good time to pick up assets. For example, a house that is sold at auction,and needs some maintenance work could be a good buy. If you arrange a deal with a builder for the improvements to be a background job, then you should be able to get the price reduced. Of course, this means the job will take longer to complete, so you will have to consider possible loss of income if it is an investment.

This isn't a bad idea. I have relatives and friends that are builders, electricians and plumbers. So with enough money it would be quite cheap to do up or build a house... I kind of have enough to invest in a plot of land I'm not sure how much a house costs to build although I guess a 4 bed would be around 50000-100000 in materials.

Edit: I'm near a rural area so land should be a lot cheaper there...

[MakeMoneyBtc]

In my opinion the best way to store your money during a financial crisis is with precious metals or real estase. Even though both of this investments are going to have problems during tough times, and their value is also going to drop i think their value will quickly recover as the crisis slowly disappears. 

[iv4n]

This question have a very logical answer actually! Just compare prices from before and after crisis! Now you have your answers I believe.
Crisis is just like a drop in crypto. You were rich when prices were on ath, now you have 90% less. But what is the point, when do you buy? You don`t buy when prices are hitting the roof! No, you sell in that moment what you have and you are stashing gold, diamonds, dollars, euros, have a little from everything. When the dip comes, when crisis hits the economy of one country you are buying, everything is cheap, everything is for sale. I been there, I felt that. Now I`m in crypto and I feel much safer than ever, cause I know how things works.

[TheCoinGrabber]

My intuition is that jewelry (precious metals and gems) would be good stores but I then remember that pawnshops haggle to get the price down on a regular year. On a bad year they'd haggle even more.

I think real estate is still safe assuming you can hold on to it until the prices rebound. I heard some people have rentals for different price ranges meaning when their tenants move out on a crises, there will still be people moving in - those who moved out from more expensive areas.

[nur rochid]

I guess we just choose which one. on the one hand cryptocurrency is like digital gold, but has a high risk. on the other hand, real estate is a good investment tool, but requires large funds to buy it

[Beerwizzard]

(bitcoin is considered to behave like gold at this point)

Bitcoin obviously has some features that he took from gold but it is definitely not about safety. At all times cryptocurrencies were considered as a risky asset and there is no chance that an asset, that was risky at a stable time will somehow become safer than the things that were considered as safe.
If you feel like the economy in your country will collapse soon then go get a mortgage in your local currency. If your prediction will be right then you will even earn some good profit.

[alisafidel58]

Apparently gold never does very well in financial crises because when people stop earning money they start selling them and thus their value goes down..

You're actually right, but in a perspective of someone whole sells their gold into a pawn shop or some greedy bastard who has taken advantage of the situation of a person who doesn't have money.

[daarul50]

I disagree if bitcoin is positioned as the first alternative to avoid the financial crisis because there are many ways to avoid this. If bitcoin is positioned like that then more and more people are thinking negatively about bitcoin and this will hinder the development of bitcoin in the future.

[1Referee]

I guess we just choose which one. on the one hand cryptocurrency is like digital gold, but has a high risk. on the other hand, real estate is a good investment tool, but requires large funds to buy it

Bitcoin is the first that was actually considered to be digital Gold. Alternative crypto currencies aren't even close to that. If I had to categorize them, they would be similar to fiat currencies. In both cases they are created out of nothing and just because people are foolish enough to buy them they have some sort of a value.

Real estate is good if you want to preserve wealth or create a passive income stream within a steady economy. A financial crisis means people losing jobs, lower overall incomes, etc. This basically puts pressure on your passive income streams out of real estate, so it might not even be that good of an option after all.

I would personally stick to what I have already, which is Bitcoin and fiat. You can't know beforehand what will be the best safe haven to sit in during a financial crisis, not even with Gold that people tend to agree on is a safe haven. It's Russian roulette that you are playing if you try to position yourself well.

[magneto]

I'm wondering if anything actually goes up or stays stable during a financial crisis since most things seem to fall. Meaning that currencies potentially go up during a crisis (bitcoin is considered to behave like gold at this point) but since currencies are always horrible to put money into (not necessarily short term but long term with inflation), what else?

It depends on what the nature of the financial crisis is, really.

If it's inflationary, then in previous instances, gold and silver have performed well relative to a country's fiat currency, mostly because people see it as a sort of hedge against inflation. This is a reason why I think holding bitcoin will serve as a hedge if you believe that some sort of hyperinflation is going to come by, because it does have a capped supply, and essentially has all the monetary aspects of gold and silver.

If it's recessionary or deflationary then I think the most important aspect you can look for is liquidity. You want your entire investment portfolio to be liquid, even if that means holding fiat currency for the short term (it's not always a bad thing). I personally think that BTC, gold and silver will still outperform property and shares in these instances.

[Reid]

Apparently gold never does very well in financial crises because when people stop earning money they start selling them and thus their value goes down..

Maybe its a hedge but also its potentially risky...

I've had a look at cds but there seems to be a lot of research involved in finding the right one so I'll have to wait on that.

Wrong. It will be the other way around.

They want to save the value of their money so they input it with stones.
To save themselves from the drought that will happen.
Actually, that is more of the reason why a sudden fall will happen. They always panic even if it does not happen yet.

Survival will be the key and that is why gold will have a greater value or will just stay at the same value.
Some will sell but wise people will buy more instead of looking back to stocks, bonds and mutual funds.

If given a chance then invest with water or electricity companies. The necessities of the people whenever they dont have money anymore.
But I doubt they will let in some average people like us.